Define: Laissez-Faire

“Laissez-faire” is a French term that translates to “let them do” in English. In legal contexts, laissez-faire refers to an economic and political philosophy advocating minimal government intervention in the marketplace and individual freedoms. In the legal realm, laissez-faire principles often relate to policies regarding business regulation, property rights, and contractual freedom. Proponents of laissez-faire argue that unrestricted competition and free market dynamics lead to economic efficiency, innovation, and overall societal prosperity. However, critics contend that laissez-faire policies can lead to inequality, exploitation, and market failures, necessitating government intervention to protect public welfare and ensure fair and equitable outcomes. The balance between laissez-faire and government regulation remains a subject of debate in legal and economic discourse, with different jurisdictions adopting varying approaches based on their social, political, and economic priorities.

Literally, laissez-faire is French for “let it be.” More usefully, laissez-faire is a philosophy that favours the government keeping its hands off the economy. In other words, supporters of laissez-faire believe only free market forces should determine prices, production, wages, and other key elements of the economy. At the opposing pole of laissez-faire economics are command economy systems where the government controls all means of production. The effectiveness of laissez-faire policies continues to be argued vigorously. Nearly all economists agree that complete laissez-faire is impossible for today’s U.S. economy. Moreover, voters’ expectations of an important role for government in the economy has made laissez-faire politically unpalatable. But the laissez-faire philosophy, which continues to provide the intellectual underpinning for advocates of limited government, remains a potent force in economic debate.

The laissez-faire theory has certain prominent characteristics. These are:

• Near exclusion of government intervention in economic matters
• Private ownership of properties
• Free market
• Minimal taxation
• Minimal trade restrictions

The two strongest supporters of laissez-faire theory are the Chicago School of Economics and the Austrian School of Economics.

Concepts Related To Laissez-faire Economics

Following are certain concepts that are related to laissez-faire:

• Classical economics
• Individual transfer quota – ITQ
• Crony capitalism
• Invisible hand
• Dismal science
• Keynesian economics
• Economics
• Mercantilism

Classical Economics

Classical economics is that part of economics that deals with what has been done in the subject in the 18th and 19th century. Classical economists mainly dealt with various ways in which market economies and markets functioned.

Individual Transfer Quota – ITQ

Individual transfer quota – ITQ is a limitation imposed by a particular governing body on individuals and companies. These limits are imposed on the amount of a particular good or service that may be produced by the entity on whom it is imposed.

Invisible Hand

The invisible hand is a concept that has been coined by Adam Smith, a noted economist, in “An Inquiry into the Nature and Causes of the Wealth of Nations”, written in 1776. As per this concept, individuals contribute to social improvement by making efforts to improve their respective financial conditions.

This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.

This glossary post was last updated: 29th March 2024.